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2.5m PPI complaints to be reopened

More than two-and-a-half million complaints about payment protection insurance (PPI) are to be re-opened amid concerns that firms may have unfairly brushed them aside, the City regulator has announced.

Banks, credit card providers and personal loan companies have agreed to look again at the old complaints from 2012 and 2013, which could have involved consumers being paid too little compensation or having their complaint unfairly rejected altogether, the Financial Conduct Authority (FCA) said.

Giving a progress update, the FCA said that firms have handled more than 13 million PPI complaints and an "unprecedented" £16 billion has been paid back to consumers since the start of 2011, making PPI the largest financial services redress exercise ever undertaken in the UK.

While the scandal has "significantly damaged public trust in financial institutions", i n general, firms have made improvements to the way they handle complaints and their processes are more robust, the regulator said.

The FCA said that i n 2012 and 2013 the proportion of complaints being upheld by firms in consumers' favour fell. When the regulator carried out further investigations into why so many complaints were being rejected, it was not satisfied that that all consumers had necessarily been treated fairly.

Firms have been upholding around 70% of PPI complaints, but by late 2012, the uphold rate dipped to around 60%. The FCA said the uphold rate has started to pick up again since it stepped in.

The two-and-a-half million complaints that are being looked at again were made to firms of varying sizes across the industry. Businesses supplied samples of the way they had handled complaints to the FCA, which has asked them to look at some cases again.

Firms are also pro-actively sending more than five million letters to customers they have identified as being at high risk of having suffered a past mis-sale who have not complained. Some 3.2 million letters have already been sent and a further two million will be sent in the coming months.

The scale of the PPI scandal is thought to have peaked, and the FCA said it believes the issue is "entering its final stages".

The regulator hopes to scale back its intensive PPI work next year if complaint volumes continue to fall and firms continue to improve their complaint handling processes. It plans to publish a "potentially final" update on PPI in 2015.

Martin Wheatley, chief executive officer, at the FCA, said: "Making sure anybody previously mis-sold PPI is treated fairly now, and paid redress where its due, is an important step in rebuilding trust in financial institutions.

"In around two-and-a-half million complaints this was not necessarily the case so, at our request, firms will be looking at these complaints again.

"The process is now working well; in just over three years £16 billion has been put back into the pocket of the consumer - that is unprecedented.

"Given the enormity of this exercise it is no surprise that there have been some issues along the way but our approach is delivering a good result for consumers."

Earlier this year, a BBC News investigation estimated that victims of the payment protection insurance mis-selling scandal could have potentially been under-compensated by an estimated £1 billion due to some fees and charges being left out of calculations.

Around 45 million PPI policies were sold between 1990 and 2010, worth £44 billion in premiums.

PPI was sold alongside products such as credit cards and mortgages and it was meant to help someone repay their debts if they lost their income, for example through becoming ill or unemployed or had an accident. But the insurance was regularly added to people's policies without them needing it, understanding it, or even realising that they had it.

The FCA said that "in hindsight", the profits generated for PPI sellers were so large that its predecessor regulator the Financial Services Authority's warnings and fines were not enough to change firms' behaviour.

Last September, a spot-check by the FCA focusing on medium-sized firms found " serious problems" in the handling of PPI mis-selling complaints.

The regulator said previously that firms needed to work harder to establish the ''bigger picture'' and assess what information the consumer had when they were sold the PPI policy, how it was sold and what their personal circumstances were.

The FCA said it will continue to closely supervise firms' PPI complaint handling to ensure outcomes are fair and consistent.

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